When is the right time to let go of your first customer?

First customers are god-send, they are a pampered lot; but there comes a moment when you probably have to let go of them.

There probably comes a moment when you have to let go of their ego/loyalty and most importantly, unreasonable demand.

Here is a small anecdote I came across yesterday (from a friend):

My friend’s wife was hooked on to a new beauty parlor that opened in the area (BTM layout, Bangalore to be precise). She got a cordial welcome from the owner of the beauty parlor (lets call it Parlor A) and really liked the service. Impressed, she (unknowingly) started the WoM campaign for the beauty parlor and as with any apartment culture, the women got something new to talk about.

Within 6 months of the launch, Parlor A was #1 in the area (2 smaller players folded up) and had a very loyal customer base. Like with any startup, they felt the need to move to a better place and target more percentage of customer’s wallet.

First Customer of Nano
First Customer of Nano

Eventually, Parlor A moved to a new place within the same locality. The new place was much better and of course, costlier than the earlier one. Services were charged almost 20% higher than the earlier rates and there was a bit of impersonal relationship setting up in the company.

For instance, earlier the founder herself used to serve the customers and now her employees take care of the low level tasks (like threading) and founder focused on higher packaged services.

Most of the customers had an informal relationship with the founder and that’s why they enjoyed coming to the parlour. With the new setup, that was definitely not the case.

And naturally, increase in price (which was justified as the new office also had an A/C and better equipments) didn’t go well with the loyal customers as they were used to cheaper services. Like any other apartment evening chat, women were discussing about the costly service of this beauty parlor and clearly, dissatisfaction was in the air.

Not that Parlor A’s business was going down the drain, but loyal customers have started asking for older rates/started bargaining and in a candid way, impacting the growth of the company.

The company, i.e. Parlor A was in its growth stage and was struggling with issues like hiring, retention, employee training etc; and dissatisfied customers is the last thing they hoped for.

To continue the story, another Parlor did open up in the same area and my friend’s wife, after her first visit enjoyed the service and like earlier, she shared her experience with other flatmates.

The rest, as they say is mystery! Will better experience result in people sticking to the Parlor A vs. cost effective new shops?

Heard a similar story before as well ?

If you were the founder of Parlour A, what would you do? How would you handle such a situation? Will your decision change if a *new startup* starts their operation in the same locality?

And while you answer this, keep your initial customers, i.e. the pampered lot in mind. They bring in a lot of value, right from sharing feedback to WoM marketing; but there comes a time when you probably (?) have to let go of them.

Sometimes your most loyal customers will turn into your biggest liability. On what parameters do you define the decision to let go? Do you give special service to key influencers?

Recommended Read: Facebook – A company that didn’t listen to users and still achieved growth!

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